The Great Crash

Professor Ross Garnaut AC delivered six webinars in this RESET series. More information on the series is available here.

On Wednesday 20 May, Professor Garnaut presented #1, The Great Crash.

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Lecture one outlined the progress and impact of the pandemic, from where it laid waste to Wuhan in January 2020, and exploded in Europe - the centre of the pandemic in March, to be succeeded by the United States in April and the developing world after that.

The medical response has been uneven, varying greatly with the quality of public health systems and the effectiveness of political institutions and leadership to absorb knowledge and use it to shape policy responses.

The economic effect of the responses to the pandemic has been catastrophic, in the world, and in Australia. The immediate negative impact on international trade of the closure of China and its Northeast Asian economies was larger and more sudden than that in the Asian Financial Crisis. As the centre of the pandemic has shifted into Europe, the United States and then most severely the developing world, the global economy has entered by far the most severe contraction since the Great Depression.

Lecture one will outline the monetary and fiscal responses to hold up demand for goods and services and bolster employment and incomes that have helped to avert financial crisis in the early stages of The Great Crash of 2020. It will also outline that this economic crisis is more than a consequence of shrinking demand: restrictions on movement of people and goods and services have sharply reduced the supply capacity of the Australian and global economies. The latter is likely to depress productivity and incomes into the future.

In the absence of deliberate and effective measures to expand opportunities for trade and to raise productivity, the pandemic recession will usher in a new era of global and Australian economic stagnation.